Nick Clegg has used the fifth anniversary of his election as Liberal Democrat leader to claim his party has been on a journey to the centre ground, and used the example of the party's commitment to balanced welfare changes to show how it has matured in office.

The deputy prime minister defended the three-year benefits squeeze set out in the autumn statement as a necessity, saying Labour had tied itself in knots over its defence of a rise in line with inflation.

At the same time he claimed he had prevented the Tory right imposing draconian welfare cuts, pointing out that in the autumn statement he had agreed to only £3.8bn of the £10bn cuts sought by "the siren voices on the Conservative right".

The overall tone of the speech, at a time when the party is slipping to fourth in some polls behind Ukip and questions are being raised about the viability of Clegg's leadership, was defiant, and less about his strategic relations with Conservatives than some of the advanced billing had suggested.

Clegg also reiterated his call for the welfare squeeze to include universal welfare benefits of pensions, but stressed he was not expecting David Cameron to change policy before the 2015 election. "I just don't think it is justifiable or sustainable when so many other people are tightening their belts to somehow say multimillionaire pensioners receive universal benefits across the board," he said.

In a speech delivered to the CentreForum thinktank in London, he said the party had turned in office from liberal dogmatists to liberal pragmatists.

He said: "The challenges of governing at a difficult time have given us a harder edge and a more practical outlook.

"We're not centre-ground tourists. The centre ground is our home. While the tribalists in other parties desert the centre ground under pressure, the Liberal Democrats have done the reverse. Under pressure, we've moved towards the centre."

The remark is designed to show the party has not moved to the right, but away from a leftwing oppositionalism.

He repeatedly used the example of welfare, including the introduction of welfare benefit caps, to illustrate his belief that the party combined the need for responsibility with the need for opportunity.

Embracing the reforms, he said: "Some of our critics believe either that the Liberal Democrats in government did not want to reform welfare or were powerless to stop the Conservatives from doing so. The truth is this: yes, welfare reform has been painful and controversial at times but it was in our manifesto and on our agenda right from the start."

His remarks drew a lukewarm response from the social liberal forum, an influential grouping within the party. Dr Prateek Buch, SLF director, said: "We need a united government, but all too often this coalition is united behind the wrong things – and on the central platform of the coalition's economic strategy, there remains a damaging reluctance to propose truly liberal reforms in the misguided fear that advocating alternatives to Osborne's failing dogma automatically plays into the hands of Ed Balls."

In some of his toughest remarks on welfare, Clegg said Labour had bequeathed a system that was unaffordable and did not make work pay. He said: "When two-thirds of people think the benefits system is too generous and discourages work then it has to be changed or we risk a total collapse in public support for welfare existing at all.

"Politicians of the centre ground, who believe in a benefit safety net, have an absolute duty to be tough on those few who abuse, or try to abuse, the generosity of taxpayers and exploit our benefits system. And an absolute duty to make sure the system as a whole is and appears to be fair."

He added: "Let's be honest. Some people do need tough sanctions to get them active."

Defending the three-year benefits squeeze for those in and out of work he said: "There is absolute moral equivalence between working hard in a job and working hard to find a job. Out-of-work benefits should rise at the same rate as in-work benefits because they should only go to people who genuinely can't find work or are too sick to work."

He said: "The enabling state pays for childcare so you can get out to work; it doesn't pay you to stay at home for 20 years. The enabling state offers a benefit back stop for those who need it but ensures that work is always the better option.

"We should not delude ourselves that it is an act of compassion to tell someone that because of ill health they should spend the rest of their lives dependent on benefits. It belittles their potential and ends up being a self-fulfilling prophecy.

"It is time for politicians and the benefits system to recognise that people with health conditions have just as much potential as everyone else if only they are given the help they need to get on.

"Labour left us with a benefit system in which work didn't always pay, but sometimes playing the system did. A benefit system that trapped millions on out-of-work benefits with no hope or aspiration for a better life.

"A benefit system that took money off people in tax and then gave them some of it back if they filled out a series of government forms instead of letting them keep the money in the first place.

"And a benefit system which meant in some parts of the country families who didn't work were able to live in far better homes than families on low or average wages. The benefit system was so badly designed we had a social duty to reform it."

On universal pensioner benefits, Clegg stressed he was not seeking changes before the 2015 election because of Cameron's commitment to leave them untouched.

He said: "I am not asking the prime minister to reopen that during this parliament. What I am saying is in the future as we make further savings – and I say this as a Liberal Democrat party leader; you need to ask him whether he is going to put this in the Conservative party manifesto."

Clegg said that those in the Lib Dems who attacked the compromises of coalition were being derelict in their duty, he said. In times of economic distress: "Politics quickly becomes polarised as the homing instincts of ideologues to the right and the left kick in."

He also issued carefully calibrated attacks on the anti-centrist factions in both main parties that will keep open the option of working with either party after the next election. He said the Tory right "dreamed of a fantasy world where we can walk away from the EU, but magically keep our economy strong; where we can pretend the world hasn't moved on, and stand opposed to equal marriage; where we can refuse to accept the verdict of the British people and pretend the Conservatives won a majority of their own".

He said that at the same time: "The Labour left lives in a different, but no less destructive, fantasy world where their irresponsible borrowing in government can be remedied by borrowing more; where every budget reduction can be opposed without explaining where the money should come from; where games can be played with political reform and EU budget policy without long-term damage to their credibility.

"We know from experience now: if you protect the health and schools budgets, as we correctly did, you cannot oppose every reduction in the welfare budget.

"If you want to protect welfare as well, you've got to accept that you will end up gutting the crime budget, or the BIS [Business, Innovation and Skills] budget, or local government. We get that now. We've learned to live with a host of invidious choices."

He also defended the overall economic strategy, saying: "We have to cut expenditure to bring down the deficit. Otherwise we put ourselves in hock to the bond markets, drive up interest rates and impoverish future generations."

But he insisted the government had taken steps to drive demand, such as "putting money back in the pockets of the low- and middle-income families we know are most likely to spend it with our income tax cut".

"We have resisted the false choice between a state that steps in and assumes control, and a state that backs off and washes its hands," he said.

He ended by saying: "Both the Conservatives and Labour try to occupy the centre ground. Both get pushed off it by their tribal politics. But the Liberal Democrats are not for shifting. We know that the centre ground is what the people of Britain want their government to occupy."